Complete Gacha Ban Would Spell Bad News for the Social Games Business

A popular sales method used in Japanese mobile games may soon be deemed illegal.

The social games business is still very young, meaning there are a lot of things still to be worked out as certain Japanese companies are finding out right now. A highly profitable sales tactic employed heavily by companies like GREE and DeNA may soon be deemed illegal in Japan, a move which would certainly put a damper on what is a rapidly-expanding portion of the industry in that country.

The issue involves complete gacha, also referred to as compugacha or konpu gacha in Japan. Gacha on its own involves money being handed over in exchange for a random item; this is acceptable in a legal sense. Where complete gacha becomes problematic is in the way it rewards players with a special item for completing a set of items which are obtained randomly. This can, as you might imagine, become an expensive proposition as attempting to collect all the parts of a set can require countless transactions. Comparisons have been drawn between it and gambling, which is largely illegal in Japan.

Over the weekend The Daily Yomiuri reported (via Wired) that sources had indicated Japan's Consumer Affairs Agency reached the conclusion that complete gacha is in violation of the law. The issue was raised after an increasing number of complaints were received from players who were subjected to high charges or, in some cases, from parents complaining about their children becoming addicted and spending enormous amounts of money. Five such complaints were filed in the 2010 fiscal year, but that number jumped up to 58 in fiscal 2011 as the practice became far more commonplace. The sources indicated social game companies would be told to stop using these sales methods or face punishment of some sort.

The CAA confirmed an investigation was taking place, Nikkei reported yesterday, although the agency claimed it had not yet rendered a decision.

Yomiuri recounted the stories of two young boys, one who spent 400,000 yen (approximately $5,012) in one month, and another who spent 120,000 yen ($1,504) in only three days on games containing complete gacha. Bloomberg also mentioned one user who managed to rack up a whopping 4 million yen ($50,107) in charges over a two-month span. The games themselves are often free to play, although the charges players can accrue are anything but.

These are extreme examples, to be sure, yet it's important to note that complete gacha is an important aspect of these companies' bottom lines. The stock for both GREE (owner of the mobile-focused social networking service of the same name) and DeNA (owner of the Mobage cell phone social gaming network) have taken a significant hit, with each falling the maximum 500 yen on Monday before rebounding a small amount today. Those declines represented a 20 percent drop for DeNA and 23 percent for GREE; the latter resulted in founder Yoshikazu Tanaka, Japan's youngest billionaire, losing $704 million according to Bloomberg.

The two, and mobile/social games in Japan as a whole, have been massively successful as of late -- a rare bright spot for the Japanese gaming industry, and in fact its entire technology industry. Following their rise to prominence in Japan, overseas expansion has been targeted: GREE recently purchased U.S. developer Funzio, while DeNA obtained U.S. developer ngmoco and its Plus+ social gaming network in 2010 before signing a deal with Disney to develop mobile games earlier this year. But if the companies suddenly find themselves losing out on a significant revenue stream, that could put a real damper on their plans to grow internationally.

GREE and DeNA each instituted a limit on spending for teenagers last month so that, depending upon a player's age, he or she could spend no more than 5,000-10,000 yen ($63-$126) per month. That may not be enough to save the companies from having the Japanese government intervene, which seems like a strong possibility, and analysts do not paint an optimistic picture if the CAA does indeed decide to ban complete gacha.

"This raises questions about whether the sector's growth in Japan is sustainable," analyst Yusuke Tsunoda told Nikkei. Another analyst, Mitsuo Shimizu, told Bloomberg, "The situation remains severe," also adding, "Their profitability is at risk, depending on the government's decision." Makoto Sengoku agreed, stating, "The market for social games may shrink if the warning is issued."

While DeNA would not comment on the matter, GREE expectedly attempted to downplay the impact of a complete gacha ban. "Even if the 'complete gacha' is abandoned, it won't rock the foundation of GREE," said Ryutaro Shima. "We will consider introducing new services to spur sales."

Upheaval in the social/mobile games market would not be shocking in the slightest given its relatively young age. Just last year, concerns were raised about free-to-play game players in the U.S. spending large sums of money on microtransactions/in-app purchases, some of which can cost as much as $100. Complaints about this led to an investigation by the Federal Trade Commission.

With the Japanese games business hardly at its peak, this could prove to be a major setback for one avenue that it was doing exceptionally well in. And it's not only companies focused on this market that will be impacted -- Konami and Capcom are among more traditional game makers with intentions of exploring the space, and so they too would be losing out with a ban on complete gacha (which was reflected when their respective stock prices took a hit yesterday). This might please gamers who don't wish to see these companies spending any resources on what they don't consider to be "real" games, although publishers will no doubt look to find other revenues streams beyond complete gacha if that is no longer an option for social/mobile games. Whether they're able to do so as effectively as they can now, however, is something we'll have to wait to see.

Bad News for the Social Gaming Business...

Warning... rant incoming!

These so-called "social" games, which are really just terribly made pieces of crap designed to sell you worthless e-trinkets (and in this case, exploit your addiction to worthless e-trinkets) is nothing more than a scam designed to prey upon the feeble-minded. I'm sorry, but there is absolutely no reason to play a lottery to MAYBE win a fake hat for your fake pet unless you are either a) not very intelligent, b) addicted to gambling or c) clinically depressed in some way. The entire business model is designed to fleece these people-- while producing a product that is nothing more than PURE CRAP. These are not great games we're talking about.

If you play games like this, step back and ask yourself, where is your self-respect? Your better than that. Go play a game that's actually fun. Or if you don't think other games are fun, maybe gaming isn't for you. Go outside.

And if you MAKE games like this, you also need to stop. They're no good. You're on the same level as telemarketers-- scamming people to give up their money for something that has no value. Make a game that's actually worthwhile.

Pangya

I love the game Pangya: Fantasy Golf, which has a gacha system, but if I played gacha as much as some of the overseas people I know, then I'd be in the hole for thousands of dollars. These games don't guarantee that you win anything, so what happens is that each time you play, it resets, and you have the same minute percentage chance to win. Basically, it is virtual gambling in a sense. It is possible that some sort of regulation is needed (like how slot machines are mandated to provide winners every X spins of the wheels on average), but I'm not sure what the legal basis for banning it would be... This is not the same as some of the examples others have provided. While ME3 or LP2 do have similar systems, they are based around currency that can be acquired in game, where as for gacha, you litterally pay money for tokens to use for nothing but gacha, and the only way to acquire said items is through the system (and they are often some of the better items in the game). All of Ntreev's (Gamerage) games have a system like this.

@imercenary

So do they hand out unlimited amounts of free game pieces? Aren't they attached to the packaging? Since they will still make you at least pay for the empty cups or whatever, you are still buying a game piece no matter what.

It's been a long time since I've been to McDonalds, least of all during a Monopoly event so maybe something has changed.

Interesting point of view..

Initially I was going to argue against you, but you do kind of have a point... Granted the monopoly pieces at mcdonalds come with the food, but these so called 'gachas' come with (are) a random item. One could argue that the difference is that one is thrown in with an item being purchased already, while the other is purchased solely for itself. But, there are plenty of people who buy things at mcdonalds solely for that monopoly event... Good thought!

So...

Good

I understand (or it's my opinion) that this article presents the ban in a troubling light; we all like to see gaming companies succeed.

Still, I think this kind of sales tactic is exploitative. Rather than delivering a good product for a set amount of money, companies are selling consumers the chance of having a cool item or prize. I understand that companies can do what they want and consumers can 'just not participate in microtransaction/complete gacha/etc' but I've played games that employed systems like this (dungeon fighter online, for example) and I felt like it was pretty disingenuous.

If the product you want me to buy is worth the money then you should put a price on it and sell it, not devise a system designed specifically to manipulate weaknesses and compulsions to make more money—not because you've created something worth buying but because you understand how to take advantage of me.

I hope that makes sense, and I hope this sort of "complete gacha" system never catches on in the US.

On an even more soap-boxy note, I'm a little surprised 1up published an article painting the companies that use these systems in an even remotely sympathetic light after the US mega-millions lottery hit a high a month or so ago—when people who make under 13k a year spend an average of 9% of their income on lottery (http://www.ibtimes.com/articles/321601/20120329/lottery-mega-millions-state-new-york-poverty.htm) it should be pretty apparent to us how these systems exploit. In the US the systems happen to take advantage of the poor by selling them false hope, I don't know who *exactly* is being taken advantage of in the world of gaming but I want gambling systems to stay out of it.

Titles need to be at least 3 characters long.

I've always seen it as we wouldn't have predatory business if someone didn't know there was a market to exploit. As it is, schemes like this are foisted upon the world with the implicit knowledge from the producer that it is a rip-off.

Doesn't Mass Effect 3 Do The Same Thing

I didn't play ME3's multiplayer, but I remember a friend telling me you had to pay money to get random upgrades. As soon as I heard that I just officially lost the little bit of respect I had left for Bioware. They eroded that respect with the casual shooter that is Mass Effect 2. They eroded it even more with the train wreck that is Dragon Age 2. They eroded it even more after they began letting EA whore their name out to developers that have nothing to do with Bioware. And then the final nail in the respect coffin came after I heard they were adding Free-To-Play slot machine like micro transactions into a $60 game.

Lost Planet 2 did something similar, but they didn't charge you money to get those random upgrades. The fact that nobody was making a bigger deal out of what Bioware did really shook me. Are we already so used to being ripped off that we don't even open our mouths anymore when such a clearly manipulative money making scheme makes it into a huge game like Mass Effect 3? Especially when they force you to use money to get the best equipment.

Nobody has a problem with this? Really? Noone has a problem with a future where you have to pay full priced for Call of Duty, but pay real money for all the best weapons, maps, equipment, kill streaks and armor? Really??? No one has a problem with buying full priced games that are filled with micro transactions for things that USED to come with the game?

That line of logic doesn't make sense...

Also, you don't have to and cannot buy upgrades in mass effect with real money or microsoft points. Instead, the game has you purchase "packs" with "credits" that you earn buy playing multiplayer. The packs themselves contain random equipment/class unlocks/etc.. You can buy these "packs" with real money, but I doubt anyone ever does since earning credit on ME3 multiplayer is very easy to do. Also, there isn't anything extremely rare worth buying the packs for.